The procedure of composition with creditors aimed at business continuity (“concordato preventivo con continuità aziendale”, provided by art. 186-bis of the Bankruptcy Law) has a major impact on the rules governing public contracts, above all with reference to the requirements requested both for the participation of economic operators in the public tender procedures and for their capacity to enter into agreements with public entities.

Indeed, partially modifying the previously applicable regime, the introduction of composition with creditors aimed at ensuring business continuity (hereinafter. the “Procedure”) leads to new and different prospects in the management of enterprises in situations of crisis and in the corporate rescue, because it implies that the opening of the composition procedure is no longer an impediment to the award and execution of public contracts.

The Procedure is regulated by article 33, Law Decree no. 83 of 2012 (converted into Law no. 134 of 2012) which has introduced article 186-bis of the Bankruptcy Law (Royal Decree 267 of 1942). This law modifies the Public Contracts Code (Legislative Decree 163 of 2006), envisaging an exception to the provision concerning the so-called general requirements of bidders (art. 38).

Article 38 of the Public Contracts Code identifies a series of subjective conditions required for the participation of the economic operators in public tenders. In the absence of these conditions, the economic operators are excluded from the procedure for the award of contracts and concessions and cannot enter into the relative public contracts, nor can they be assigned sub-contracts.

The said requirements must exist at the deadline for the submission of the bid (in open procedures) or for the application for participation (in negotiated procedures) and must be maintained for the entire duration of the tender procedure until the final award (Council of State, Plenary Session, 4 May 2012, no. 8; Council of State, Sec. VI, 18 December 2012, no. 6487). If the requirement is lost during the course of the procedure the bidder is excluded.

Following final award and stipulation of the contract, the maintenance of such requirements is in any case a condition for the execution of the contract. Losing such requirements leads to contract termination (TAR (Regional Administrative Court of Lazio, Rome, Sec. III, 3 December 2009, no. 12411; Council of State, Sec. IV, 12 March 2009, no. 1458).

One of the general requirements set forth in article 38 of the Public Contracts Code is that the enterprise must not be involved in bankruptcy, administrative compulsory liquidation or arrangement with creditors proceedings; as a matter of fact the situation of crisis that the opening of these proceedings gives rise to can compromise the enterprise’s professional and economic-financial reliability, jeopardizing the correct fulfilment of the contract obligations.

According to the new article 186-bis, the foregoing is however “without prejudice to the case as of article 186-bis of the Bankruptcy Law”, i.e. the case of composition with creditors aimed at ensuring business continuity. The law is aimed at guaranteeing the satisfaction of the creditors through the continuation of the enterprise’s business under the responsibility of the debtor himself or of third parties.

The legal system of the public contracts, as regulated by the Public Contracts Code, is characterized by a high degree of rigidity and formalism. The new Article 186-bis of the Bankruptcy Law now expressly sets forth the legal consequences that the Procedure produces (i) on the contracts which have been already signed , and (ii) on the public tender procedures.

  1. As for the first point, the simple submission of the application for admission to the Procedure prevents any termination of the already signed contract. The law itself also provides that any contrasting agreements will be ineffective. The effects of this provision are not limited to the single contract involved, but also extend to the accessory and related contracts such as, for example, any internal agreements regulating relationships between members of any Temporary Joint Venture (ATI) and to subcontracts. In all these cases, any agreement between the parties that envisages the termination of the accessory contract in the presence of a Procedure will be ineffective. After the decree which admits the enterprise to the Procedure has been issued, the execution of the contract is subject to the filing of a specific report of an expert attesting the compliance with the creditors’ interest and the reasonable capacity of the company to fulfil the public contract.

The law also provides that the transferee company of the enterprise or of the line of business can benefit from the continuation of the contract.

  1. As regards the tender procedures, the law sets forth that admission to the Procedure does not prevent the participation of the enterprise in the tender. This provision also applies to enterprises forming Temporary Joint Ventures (ATI) providing that (a) the Procedure does not involve the lead company but a principal and that (b) the other members of the same joint venture are not in bankruptcy or admitted to a similar Procedure. A report of the expert attesting the compliance with the creditors’ interest and the reasonable capacity of the company to fulfil the public contract must be presented.

To permit participation in public tenders of enterprises admitted to the Procedure (whose solvency and capacity to execute the contract is far from being certain) the law refers to the discipline of the reliance of requisites (Article 49 of the Public Contracts Code). In detail, a specific declaration of another economic operator, which assumes the role of auxiliary company must be provided. The auxiliary company shall undertake (a) to provide the company admitted to the Procedure, for the entire duration of the contract, of the resources needed for the execution of the contract and (b) if necessary, to replace the company admitted to the Procedure in the case of the bankruptcy of same. The auxiliary company and the company admitted to the Procedure are jointly and severally responsible. The auxiliary company is requested to meet all the requirements set forth for the participation in the tender, including the general requirements as of article 38 of the Public Contracts Code. However, the auxiliary company may not be admitted itself to a similar procedure, as this would breach the prohibition of so-called “cascade relying” recently stated in case law (Council of State, Sec. IV, no. 2832 of 24 may 2013).